Transcribed Image Text
A firm has 2,000,000 shares of stock outstanding, total debt of$3,000,000 at an annual interest rateof 8% and annual depreciation expense of $300,000, and isconsidering borrowing an additional$6,000,000 at 8% and buying back one-half of those shares.Assuming EBIT of $1.2 million, what is thiscompany’s cash coverage ratio (a) before and (b) after theproposed restructuring? What can youconclude about the impact of financial leverage on a firm’s cashcoverage ratio?
Other questions asked by students
Basic Math
General Management
Accounting
Accounting
Statistics
Accounting